This week’s Market Update is written by Andrew Dunn as Gary is away on the Fylde Coast visiting family. We’d like to take this opportunity to wish you all a lovely Easter weekend, whatever you are up to.
So onto our Market Update; tariffs still dominate the news flow and will likely do so for some time to come. Markets have had some modest recovery this week, generally speaking, reflecting their tendency to overshoot both up and down on major news events.
In this week’s update we will have a closer look at bond markets and, ultimately, what caused Trump – in large measure – to pivot from his previous more aggressive plans. This is no surprise as history shows the power this less well-known, market has. Niall Ferguson’s excellent book ‘The Ascent of Money’ charted its significance in events including Britain winning the Napoleonic wars, the North triumphing over the Confederacy in the American Civil War and, of course, War Bonds changing the face of WWI.
Today we will also provide some comment on the fight for economic supremacy that will likely play out between the US and China.
On this week’s agenda:
- Why the bond market is important
- Outlook for investing in China
- Can US exceptionalism continue?
- Summary
The bond market
The bond market has its origins thousands of years ago and is the mechanism by which institutions like governments and companies raise finance. It is the warning sign that Trump hoped he could ignore but ultimately was the reason that he diluted his tariff assault.
So, why is that when neither Congress nor Senate could? Let’s start by looking at the extent of the problem; the US has about $36 trillion of debt – the most in the world and even more than the peak after WWII when adjusted for inflation. It was only about $5 trillion in the year 2000. Successive US Presidents have acknowledged the problem but no one until now has had the appetite to try and do anything about it. Trump’s first presidency added significantly to the debt and then Biden added a similar amount too.
Continues…
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Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.